House passes bill to bury ghost of retro tax

New Delhi: Parliament on Monday cleared a bill to bury the ghost of retrospective taxation which had created "discontent" among foreign investors even as Finance Minister Nirmala Sitharaman assured the Rajya Sabha that the legislation does not dilute the sovereign right of India to levy taxes.

The Rajya Sabha returned The Taxation Laws (Amendment) Bill, 2021 after a brief discussion. Opposition parties, Congress, DMK and TMC had walked out of the House to protest against listing of the bill in the supplementary business circulated just hours before the House took it up. The amendment bill, passed by the Lok Sabha last week, will enable the government to withdraw all tax demands made on companies like Cairn Energy and Vodafone using a 2012 legislation on indirect transfer of Indian assets prior to May 28, 2012.

The 2012 legislation, commonly referred to as the retrospective tax law, was enacted after the Supreme Court in January that year rejected proceedings brought by tax authorities against Vodafone International Holdings BV for its failure to deduct withholding tax from $11.1 billion paid to Hutchison Telecommunications in 2007 for buying out its 67 per cent stake in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vodafone India Ltd.